Break-Even Analysis
FIN/200
July 29, 2010
Justin Henegar

13. Healthy Foods, Inc., sells 50-pound bags of grapes to the military for $10 a bag. The fixed costs of this operation are $80,000, while the variable costs of the grapes are $.10 per pound. a. What is the break-even point in bags? 80,000/5= 16,000 bags- This is the company's break-even point because the variable per unit would be $5.00 if it's .10 per pound with a 50-lb bag. The other answer I received was 8,080 bags but this would be inaccurate.

b. Calculate the profit or loss on 12,000 bags and on 25,000 bags. At 12,000 bags the loss would be $20,000 and at 25,000 bags the profit would be 45,000 c. What is the degree of operating leverage at 20,000 bags and at 25,000 bags? Why does the degree of operating leverage change as the quantity sold increases? At 20,000 bags the DOL is 5% and at 25,000 bags the DOL is 2.8 %. The degree of operating leverage changes because the operating income increases.

d. If Healthy Foods has an annual interest expense of $10,000, calculate the degree of financial leverage at both 20,000 and 25,000 bags. The EBIT at 20,000 bags is 20,000 as worked out in part b. So, calculate: (20,000)/ (20,000-10,000) to get a DFL at 2 times. The EBIT at 25,000 bags is 45,000 as worked out in part b. Calculate: (45,000)/ (45,000 - 10,000) to get a DFL at 1.29 times.

e. What is the degree of combined leverage at both sales levels? Find the DCL at 20,000 bags by multiplying 20,000 x (10 - 5) and dividing by (20,000 * (10 - 5) - 80,000 - 10,000) to get 10 times. Find the DCL at 25,000 bags by multiplying 25,000 * (10 - 5) and dividing by (25,000 * (10 - 5) - 80,000 - 10,000) to get 3.57 times

...PRACTICE QUESTIONS ON BREAK-EVENANALYSIS
1. A small firm intends to increase the capacity of a bottleneck operation by adding a new
machine. Two alternatives, A and B, have been identified and the associated costs and revenues
have been estimated. Annual fixed costs would be $40,000 for A and $30,000 for B; variable
costs per unit would be $10 for A and $12 for B; and revenue per unit would be $15 for A and
$16 for B.
a) Determine each alternative’s...

...FIN 200
RE: BreakEvenAnalysis
A. What is the break-even point in bags?
Formula: FC/P – VC
$80,000/$10-5 (0.10 x 50 lbs = $5.00)
$80,000/$5
Break-Even Point would be $16,000
B. Calculate the profit or loss on 12,000 bags and on 25,000 bags
12,000 bags
12,000 x $10 = 120,000
80,000/$5 x 12,000 = $80,000 + $60,000 = $140,000
120,000 – 140,000 = -20,000 loss
25,000...

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BREAK-EVEN POINT ANALYSIS
LETTER OF SUBMISSION
Date:
To
Md. Aiyub Islam
Professor,
Department of Accounting & Information Systems,
University of Chittagong.
Subject: Solicitation for acceptance of the Term Paper.
Dear Sir,
I have pleasure in forwarding my term paper on Break-even Point Analysis that have assigned me...

...
BreakEvenAnalysis
A breakevenanalysis is a method used widely by businesses to assist them with finance. The breakevenanalysis shows a business when their amount of revenue is equal to their costs. This is known as the break-even point. Although the breakevenanalysis shows many other...

...#3
Break-EvenAnalysis
Rob Holland Assistant Extension Specialist Agricultural Development Center
September 1998
One of the most common tools used in evaluating the economic feasibility of a new enterprise or product is the break-evenanalysis. The break-even point is the point at which revenue is exactly equal to costs. At this point, no profit is made and no losses are...

...Margin and BreakEvenAnalysis.
Many factors come into play in determining business success. One of them is the financial factor. For a company to set financial goals it is crucial that its management know in detail the products or services they sale or provide. This is the analysis of two different scenarios at Aunt Connie's Cookies Simulation (University of Phoenix, 2011) and the financial performance of Jamestown Electric Supply...

...Breakevenanalysis is an important part in production management and decision making. In this assignment, the key elements of the break-evenanalysis will be discussed. The key elements of break-evenanalysis are fixed cost, variable cost, total revenue, break-even point and margin of safety. Although break-even...

...Introduction:
Break-evenanalysis is a technique widely used by production management and management accountants. It is based on categorizing production costs between those which are "variable" (costs that change when the production output changes) and those that are "fixed" (costs not directly related to the volume of production).
Total variable and fixed costs are compared with sales revenue in order to determine the level of sales volume, sales...